Laura recommends seven small habits that can create massive financial success no matter your age or stage of life.
Laura recommends seven small habits that can create massive financial success no matter your age or stage of life.
Money Girl is hosted by Laura Adams. A transcript is available at Simplecast.
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You've probably noticed that the small things you do (or don't do) regularly add up, like walking somewhere instead of driving, cutting one unhealthy food from your diet, or reaching out to a friend or family member you haven’t spoken to in a while. Starting and building various “micro-habits” make the difference between success and failure in many areas of your life, like health and relationships.
There are also many money micro-habits that help you take control of your finances, feel secure, and stay on the path to reach your financial goals. This post will review seven small habits that can create massive financial success no matter your age or stage of life.
Welcome back! I appreciate you joining me for Money Girl episode 906! I'm Laura Adams, an award-winning author, on-camera spokesperson, female money speaker, founder of The Money Stack, a Substack newsletter, and host of Money Girl with over 43 million downloads.
If you enjoy the free content we love creating for you, please take a moment to rate and review the show in your podcast app! If you have a question about money, leave it on our voicemail at 302-364-0308. You can also visit LauraDAdams.com to email me and learn more about my books, courses, and the free Money Stack newsletter.
7 Micro-Habits That Boost Financial Success
Use one or more of the following seven micro-habits to easily improve your finances without making any radical or uncomfortable changes.
1. Identify or review your financial priorities.
It doesn't matter if you're a college graduate who wants to begin investing, a parent who wants to buy a home, or a pre-retiree dreaming of traveling the world, you need to identify your top financial priorities. Just thinking about one or two financial goals or ways you want to spend your money is the first step to achieving them.
Once you have a goal, break it down into manageable smaller targets based on your timeline. For example, if you want to save $60,000 for a house down payment over the next five years, you'll need to set aside $12,000 a year or $1,000 a month.
If you want to retire in 30 years with $1 million, you'll need to invest approximately $800 a month, assuming a 7% average annual return. Having a general idea of what a goal requires, allows you to stay focused on it and tolerate any short-term sacrifices you may need to make.
Identifying and reviewing goals may only take a few minutes a month or quarter, but it’s powerful because goals can easily be forgotten. If you don’t remember your goals and keep them top-of-mind, you aren’t likely to achieve them.
One of my micro-habits is setting a monthly calendar reminder to review my goals. You might use a handwritten journal, a Google Doc, or a digital notepad. Getting clear about what you want to accomplish and making sure you don’t forget it is critical for success.
I created a Money Success Toolkit to help you create financial goals and monitor your progress. You can download it when you subscribe to The Money Stack, my Substack newsletter.
And if you're not sure what your financial priorities should be, I have lots of ideas! For instance, everyone needs emergency funds to stay safe. If you don’t have at least several months of living expenses in FDIC-insured savings, that should be your focus.
2. Use automation.
Since it's easy to forget about your financial priorities or lose motivation, I recommend outsmarting yourself by creating automated systems that guarantee good behaviors.
Here are some money micro-habits that are easy to put on autopilot:
The sooner you automate saving and investing, the more financial security you and your family will have. And speaking of family, did you know that minors with legitimate earned income can contribute to an IRA?
Let's say your teenager earns $3,000 working a summer job. That qualifies them (or you on their behalf) to contribute up to $3,000 to an IRA. If your 15-year-old child invests $3,000 per year, or $250 per month, until age 65, they'd have over $1 million to spend in retirement, with an average moderate return of 6%.
Regularly investing small amounts pays off when you start early and make automation a money micro-habit. Not having to remember or decide to invest each month is a powerful way to overcome procrastination or the temptation to spend money on something that won’t build your net worth.
RELATED: 6 ways to prepare kids for financial freedom
3. Slowly increase your savings rate.
Another money micro-habit that won't disrupt your lifestyle but gives you a considerable return is to slowly raise your savings rate annually. For instance, if you contribute 3% to a retirement account at work to maximize an employer's match, push yourself to invest more.
Most retirement plans have an auto-escalation feature, allowing you to schedule when, and by how much your contributions will increase, such as by 1% every January 1. Consider slowly increasing your retirement contributions until you hit the maximum amount allowed.
For 2025, you can put up to $23,500, or $31,000 if you're over age 50, into most workplace retirement plans. With IRAs, you can contribute up to $7,000 or $8,000 after age 50.
If you're self-employed, you can use an IRA or other retirement accounts that come with higher annual contribution limits, such as a solo 401(k) or a SEP-IRA. Again, automating a slightly higher savings rate each year makes it easier to build wealth without feeling financial strain.
READ ALSO: Am I saving enough for retirement?
4. Ignore the financial news.
For most long-term investors, what's happening in the financial news and markets is largely irrelevant. Daily or weekly changes only matter if you need to sell or spend your entire investment portfolio in the short term. That’s why money for short-term needs should never be invested!
Instead of getting emotionally involved in the financial news cycle, a wise micro-habit is to ignore trends and own diversified investments likely to grow over the long term, such as an index fund.
A broad market index fund is made up of hundreds or thousands of underlying stocks that aim to mimic a particular market, like the Standard & Poor’s 500 or the Russell 3000.
Having a diversified investment portfolio means you own various investments that don't all move in tandem. That allows you to reduce investment risk because when some investments lose value, others may go up.
Most investing firms offer a menu of diversified fund options, such as mutual funds, index funds, or exchange-traded funds (ETF). When you own a slice of a broad market that increases in value over time, you can rest assured that your investment account balance will also go up over time. That can help you tune out investment news and stick to a simple but successful buy-and hold strategy.
REAL ALSO: 10 rules for successful investing you should know
5. Check your credit reports.
Checking your credit is a money micro-habit that only takes a few minutes. You can use the official credit reporting site, AnnualCreditReport.com, or another tool like Credit Karma. Many credit cards and financial institutions offer free credit information and monitoring.
When you review your credit reports, look for errors that could be hurting your scores or indicate you're a victim of identity theft. That includes incorrect payment information (such as showing a late payment when you paid on time), errors in account balances, or accounts that aren't yours.
Correcting mistakes can quickly increase your credit scores, helping you pay less for credit and certain products, like credit cards, loans, auto and home insurance (in most states), utilities, and more. Building your credit is especially important when you plan to finance a big purchase, like a car or home, within the next six to twelve months.
You might create a calendar alert to review your credit reports at least once a year, and ideally more regularly, such as once a quarter. Seeing all your debt in one place is a good reminder of your balances, credit utilization, and payment history, which all significantly affect your credit scores.
READ ALSO: Know your score and improve your credit
6. Spend consciously.
Most people have limited financial resources which means that every cent is valuable and how you spend them matters. If I reviewed your spending over the past 30 days, I could tell you precisely what you value, such as clothes, dining out, or saving money.
Values are the things you believe are most important, and they influence how you live, work, and relate to other people. Every financial action you take, including your spending, either builds up or breaks down your values.
Make conscious spending a daily micro-habit so you only purchase what you need and will give you lasting fulfillment. That will leave you with more money to achieve your most meaningful goals.
If you're a compulsive shopper or tend to make impulse purchases, don’t miss podcast 904, 15 Ways to Stop Impulse Spending and Save More. Financially healthy people have counterproductive impulses too, but they stay vigilant to resist them and stay focused on their goals.
Here are some effective strategies to control impulse spending:
7. Leverage the right money pros.
The last money micro-habit to adopt is to be sure to use the right financial professionals.
Consulting with money experts can help you make giant leaps forward in your financial life. While I always recommend learning as much as you can about money, it’s impossible to know everything!
Depending on your personal and business situations, you might benefit from hiring a tax accountant, financial planner, estate attorney, or insurance specialist who can help you navigate hardships, answer questions, and manage complex life events.
Instead of assuming you have to manage your finances alone, ask various pros how they can help you. They might even give you some free advice. Many investing firms help clients choose appropriate investments free of charge. So, when possible, make getting expert advice a habit.
To sum up, various small, consistent actions can lead to significant financial improvements. Your ability to build wealth doesn't depend on your education or earning power. If you stay focused on what's most important, you can set yourself up for a rewarding and secure financial future.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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